State’s largest hotel group makes sweeping changes to mitigate impact of Covid-19
Dalata has pulled shareholder dividend and renegotiated with lenders amid outbreak
Dalata chief executive Pat McCann.
The State’s largest hotel group, Dalata, has pulled its shareholder dividend, renegotiated with its lenders and cancelled all non-essential maintenance as it grapples with the effects of coronavirus.
In its second trading update this month, the company flagged that its revenue between January and the end of March will be about 16 per cent lower than the same period in 2019, although it told investors that it has “significant financial headroom”.
That latest figure led Dalata, which owns the Clayton and Maldron brands, to announce several measures to “mitigate the implications” for its business, including a withdrawal of the proposed final dividend of 7.25 cent per share.
After paying rent and interest, Dalata said it has cash of about €80 million and can avail of debt facilities of about €65 million if necessary. It has also engaged with its bankers and expects to be in compliance with its debt covenants in June after amending the agreement in that regard.
“Covenants are measured at the end of June and December each year. Given the uncertainty surrounding the length of the current crisis, and other possible initiatives that may occur, it is too early to predict the financial position at the end of December 2020 at this time,” the company said.
But Dalata believes it is well placed in light of its relationship with its bankers and as a result of cost-cutting measures it has implemented. It has postponed uncommitted development capital and non-essential maintenance spending, measures which will free up additional cash of about €60 million. Total capital spending for the rest of this year will now be a maximum of €35 million, but that could reduce further if development projects are delayed, it said.
On March 9th, Dalata issued a trading update detailing the “significant reduction in booking” and “significant increase in cancellations” it had experienced as a result of the spread of Covid-19 to Europe.
“Since then, there has been a material acceleration in the rate of contraction across Europe, major public events have been cancelled, travel restrictions introduced and most recently the purpose for which hotels can be used has been redefined by the Irish and UK governments,” it said on Wednesday.
As a result, over the past two weeksDalata has secured savings and expects to “continue to do so in the coming weeks”. It will temporarily close several hotels in Ireland and Britain and significantly reduce operating capacity at its remaining hotels.
“Other initiatives include a combination of reduced working hours for some employees as well as a progressive, temporary reduction of basic salary for those whose hours have not been reduced.” The board has also taken reductions in basic pay and fees, it said, without precisely saying what those reductions are.
In addition to that, Dalata has laid off a “large number” of employees who it will re-employ “as soon as our business recovers”.
“Our primary focus is on protecting our people, protecting our business and protecting our cash,” said Dalata chief executive Pat McCann.
“Dalata is the strongest player in the Irish hotel market with a management team that has strong experience in managing through other major demand shocks and crises over the last 20 years. While we have never experienced something of the magnitude of the Covid-19 outbreak before, we are well positioned to manage our way through this crisis over the coming months,” he added.
Dalata has 30 owned hotels in its portfolio, 11 leased hotels and three management contracts, with a total of 9,211 bedrooms. Last year it reported revenue of €429.2 million and a profit after tax of €78.2 million.